Summary of the article
“Capitalizing on capabilities”
by Ulrich and Smallwood (2004)
People admire big companies because of their capabilities, even though they don’t know
anything about their strategy, number of management levels etc.
Organizational capabilities = collective skills, abilities and expertise of an organization. They
represent the ways that people and resources are brought together to accomplish work
key intangible assets, you can’t see or touch them, yet they can make all the
difference in the world when it comes to market value
Different terms per area:
1: functional competence, such as technical expertise in marketing, finance or
manufacturing
2: person’s leadership ability, such as setting direction to communicate a vision or motivate
people
3: core technical competences, like financial services firm must know how to manage risk
4: underlying organizational DNA, culture and personality like innovation and speed
Individuals have technical or leadership skills, but organizations as a whole as well
independent from these individuals
11 capabilities that well-managed companies tend to have (excel in at least 3 of the areas
and have industry parity in the others)
1. Talent
a. We are good at attracting, motivating and retaining competent and
committed people
b. Competence comes as leaders buy (acquire new talent), build (develop
existing talent), borrow (access though leaders through alliances or
partnerships), bounce (remove poor performers) and bind (keep the best
talent)
c. Means of assessing this capability include productivity measures, retention
statistics, employee surveys and direct observation
2. Speed
a. We are good at making important changes rapidly
, b. Organization’s ability to recognize opportunities and act quickly
c. Leaders should consider creating a Return-On-Time-Invested (ROTI) index, so
they can monitor the time required for various activities
3. Shared mind-set and coherent brand identity
a. We are good at ensuring that employees and customers have positive and
consistent images of and experiences with our organization
b. Ask each member of your team: What are the top 3 things we want to be
known for in the future by our best customers? And measure degree of
consensus (often leads to 50-60%, with leading firms 80-90% consensus)
c. Also invite key customers to provide feedback on brand identity
4. Accountability
a. We are good at obtaining high performance from employees
b. Performance accountability becomes organizational capability when
employees realize that failure to meet their goals would be unacceptable to
the firm
c. Track this by examining tools you use to manage performance
5. Collaboration
a. We are good at working across boundaries to ensure both efficiency and
leverage
b. Collaboration occurs when an organization as a whole gains efficiencies of
operation through the pooling of services or technologies, economies of scale
or sharing of ideas and talent across boundaries
c. Determine whether your firm is collaborative by calculating breakup value:
estimate what each division of the firm is worth to potential buyer and
compare to current market value (if breakup value is 25% more than current
value, collaboration is not a strength)
6. Learning
a. We are good at generating and generalizing ideas with impact
b. Generate new ideas through benchmarking, experimentation, competence
acquisition and improvement
c. For individuals learning means letting go of old practices and adopting new
ones
7. Leadership
a. We are good at embedding leaders throughout the organization
b. Companies that consistently produce effective leaders generally have a clear
leadership brand
c. You can track the leadership brand by monitoring the pool of future leaders
(substitute-to-star ratio)
8. Customer connectivity
a. We are good at building enduring relationships of trust with targeted
customers
b. 20% of customers account for 80% of profits
c. When employees have meaningful exposure or interaction with customers,
connectivity is enhanced
9. Strategic unity
a. We are good at articulating and sharing a strategic point of view
b. Strategic unity is created at 3 levels: intellectual, behavioral and procedural
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